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Govt revenue from telecom sector decreased due to increasing competition

Government’s revenue generation from the telecom sector has fallen considerably following the launch of Reliance Jio and due to consolidation and tariff wars among telcos, data from a Lok Sabha reply suggests. A telecom company in India pays license Fee and Spectrum Usage Charges (SUC) as a percentage of its gross revenues. License fee collection from telcos during Q3-FY17 stood at Rs 3450.13 crore, which is down 15% when compared to Q1 FY17. SUC charges collected from telcos have also fallen 22% in Q3 when compared to Q1.

Currently, the DoT collects 8% of a telco’s gross revenue as ‘license fee’, this percentage could vary between 5-8% on the basis of each circle a telco operates in. However, SUC charges are fixed at flat 3% of a telco’s gross revenue. Note that earlier Reliance Jio had earlier opposed fixing a flat SUC charge of 3%, stating that this might lead to smaller players shelling out more usage charges when compared to established players.

The top three operators in the country, namely Airtel, Idea and Vodafone have also reported a significant drop in their revenues. This subsequently leads to a lower amount of license fee and SUC collection. Airtel reported a 5% QoQ drop in overall revenues in Q3 FY17. Vodafone’s revenue dropped 3% QoQ, and Idea’s revenue was down 6.8% QoQ in the same quarter

Who paid the most?

Data taken from Communication Minister Manoj Sinha’s reply shows that  Airtel was the highest payer in terms of both SUC charges and License fee, closely followed by Vodafone and Idea. In 2015, Airtel paid Rs 2300.50 crore in SUC charges and Rs 3721.53 crore in license fee charges.

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Data also shows that the top 3 operators—Airtel, Idea and Vodafone—paid incremental charges every year between a three-year period from 2013 to 2015. However, state-owned telcos like BSNL and MTNL paid lesser charges between 2013 and 2016; in fact, MTNL paid nil charges in the year 2014 and 2015.

On the other hand, new entrant Reliance Jio paid Rs 99.36 crore as SUC in 2015, and Rs 48.36 crore in 2015. It also paid Rs 0.58 crore in 2015 and Rs 5.8 crore in 2015 in form of License fee chargesIt is important to note that Reliance Jio has 4G spectrum in all 22 circles, and unlike rest of the operators, it runs services using the 4G standard only.

Status of merger deals

Another response to Lok Sabha questions said that currently, six different merger deals put forward to the DoT are yet to receive approvals. In that, two of them are pending final approvals:
-Anil Ambani-led RCOM’s merger deal with MTS India is yet to be approved by the government since “both companies are yet to fulfil the prescribed conditions,” the reply said.
-Bharti Airtel’s acquisition of Augere’s 4G spectrum is yet to receive approval from the DoT. Both Airtel and Augere have filed a case with the special telecom court (TDSAT) challenging certain condition imposed by DoT, the reply said.

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